British Pound to Euro Forecast: Can UK Economic Resilience Keep GBP Supported?

Modified: Wednesday, 3 June 2026 17:21 BST - Written by Frank Davies

STORY LINK British Pound to Euro Forecast: Can UK Economic Resilience Keep GBP Supported?

The Pound to Euro exchange rate (GBP/EUR) remained close to 1.1570 as investors weighed signs of resilience in the UK economy against expectations of tighter monetary policy from the European Central Bank.

With both the ECB and Bank of England approaching crucial June policy meetings, markets are increasingly focused on whether recent UK data can justify Sterling's relative strength in the face of higher borrowing costs and growing economic headwinds.

GBP/EUR Forecasts: Holding Near 1.1570

The Pound to Euro (GBP/EUR) exchange rate has held firm and is trading around 1.1570. A key element will be whether recent evidence of UK economic resilience is justified and whether it can be sustained. June central bank policy decisions will also be a growing focus.

On a medium-term view, MUFG still expects gradual Pound losses with a Q1 2027 forecast of 1.13.

UK mortgage approvals increased to a 15-month high just under 66,000 for April from a revised 64,000 the previous month and well above consensus forecasts of 62,000.

There was a small decline in mortgage lending, although overall net lending to consumers held firm with stronger than expected consumer credit growth..

According to Capital Economics chief U.K. economist Paul Dales; “it was likely that households had pulled forward their planned house purchases before mortgage rates rose more.”

He added; "If so, mortgage approvals would soon fall back. That would certainly fit more comfortably with other indicators that show housing market sentiment has soured since the war triggered a jump in mortgage rates."

Markets will start to focus on this month’s interest rate decisions. The ECB will announce its latest decision on June 11th with the Bank of England (BoE) announcement the following week.

Investment banks suspect that the BoE will hold rates at 3.75% for now.

MUFG commented; “we still expect the BoE to deliver two rate hikes this year, but we have pushed back the timing to July and November from June and July previously.”

It added; “Pushing the timing back also reflects the communication that has been a bit more focused on the tightening of financial conditions that has taken place since the conflict began. With no signs of wage setting behaviour changes and inflation expectations relatively stable, the BoE can afford to wait a little longer.”

The headline Euro-Zone CPI inflation rate increased to 3.2% for May from 3.0% previously and in line with consensus forecasts. The core rate increased to 2.5% from 2.2% and slightly above expectations of 2.4%.

ING commented that the data is; “unwelcome for the ECB, though not enough to raise immediate alarm.”

It added; “A June rate hike looks close to a done deal, but the ECB's path beyond that is far from straightforward. An energy crisis of uncertain duration, broadening inflation and adverse growth effects all make for tough policymaking. That raises the risk of a policy mistake, and we're expecting the central bank to tread carefully.”

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TAGS: Pound Euro Forecasts